Maldives to establish Sovereign Development Fund with MVR1.1 bln capital

The Maldives government is looking to establish a “Sovereign Development Fund” with MVR 1 billion per year.

The fund is included in the State Budget 2017 proposed to the parliament Tuesday. The government means to deposit MVR 1.1 billion from next year’s budget as the fund’s capital with MVR 1.4 billion in 2018 and MVR 1.6 billion in 2019.

Finance minister Ahmed Munawar explained that this reserve fund will increase the trust of loan issuers and minimise the burden of loans on future generations.

The main deposit for the Sovereign Development Fund would be the new Airport Development Charge (ADC) of USD 25 the government is looking to impose on all departing passengers at Ibrahim Nasir International Airport (INIA) starting next year. Included in the state budget, the ADC is expected to bring in a revenue of MVR 565.8 million in 2017.

While further details on this fund is not included in the state budget, it states that the fund will be managed by Maldives Monetary Authority (MMA) outside of the nation’s official reserves, and that no withdrawals will be made from the fund within the first three years of its establishment.

Sovereign Development Fund

2017: MVR 1.1 billion to be deposited

2018: MVR 1.4 billion to be deposited

2019: MVR 1.6 billion to be deposited

Main deposit: Airport Development Charge

Managed by MMA

No withdrawals during first three years

Several countries across the world have integrated such funds, which are used under strict policies to fund projects lacking financial support and under emergency situations.

The 2017 State Budget proposed to the parliament projects a revenue of MVR 21.9 billion, with MVR 14.1 billion from taxes, MVR 4.8 billion from other income, MVR 878 million from free financial aid and MVR 2 billion from proposed revenue generating projects. Meanwhile, next year’s deficit is estimated to be MVR 303.7 million, which is five percent of the Gross Domestic Product (GDP).